Essentially, there’s a website that will reimburse you for the cost of a wedding gift (up to $500) if a marriage fails within 3 years (divorce only – no annulments for some reason).

The cost? 8% of the cost of the gift (you must also upload a copy of the receipt – only works with gifts – not cash).

Simple enough, right? Well here’s the problem (or one of the problems), as Daily Finance points out: It’s a flawed model.

The insurance premium of 8% is small enough to entice, but large enough to make it a relatively tough decision. And apparently the whole “credit default swap” secondary market was set up on a similar model. That concept was set up to protect lenders from losing all of their money if a loan failed. But “investors” figured out a way to take out the insurance without lending money – essentially buying insurance policies on loans they didn’t hold. So their cash outlay was significantly lower than if they had to lend money and then buy insurance on top of that.

There’s a similar industry with life insurance, too, with “investors” buying life insurance policies from people they don’t know (hoping they die soon, essentially). They call these “life settlements.” Basically people will pay someone more than the cash surrender value for their policy but less than the insurance amount and hope the person dies soon enough to yield a good return on the money… yeah, kind of creepy, right?

So Daily Finance suggests there’s going to be a secondary market for wedding receipts and that and that “investors” will target party-goers and try and buy their receipts (or copies of receipts, I guess) for a few bucks and hope the marriage ends within three years to pocket the price of the gift with only an 8% (plus cost of receipt) investment.

Pretty crazy, right? Well it’s actually not a terrible idea (assuming you don’t have a problem routing for destruction and heartache…). But aren’t there more ways for abuse?

For example, a fraudster could do things like buying multiple gifts, returning all but one (the “real” gift) and buying insurance so that they could get much more than the price of the gift if the marriage fails. Or the same fraudster could set up a wedding just so he and a few of his friends could score a 92% discount on some really cool stuff, agreeing to divorce in advance.

In an extreme case, “investors” could try and target the marriage, hoping it will fail (like send in a beautiful woman to tempt the guy and have a photographer ready…). Then again, it’s unlikely that the finances of one wedding would justify “messing with the system.” Although 200 people times $500 max gift is a ton of cash ($100,000) that’s a real extreme – 100 people at 100 bucks is only $10,000.

But what do you think? Too far? Too creepy? What else could go wrong?

Ever attend a wedding you didn’t think would last 3 years (other than your own!)? Would you pay 8% for a policy like this?

And what would you do if you found out some of your guests bought a policy in case your marriage failed?

I don’t know. I think I’ll stick with index funds and ETFs. And here’s predicting the company either loses way too much money and folds or it changes its model in response to “shenanigans” (like sending money only to the credit card used to purchase the gift, verifying the number from the receipt and literally sending a payment to the card, or something like that).

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The emotional cost of seeing marriages end (and regardless of what your perspective is on the relative merits of divorce, there is always an emotional cost) makes this whole premise sad to me. Not surprising, but sad.

Haha! Thanks. Doesn’t it feel super creepy just thinking about it? (Incidentally, I hadn’t checked but I wonder whether the company was around when we got married – almost 4 years ago! I wonder if anyone lost money on us…)

Definitely a creepy way to try to make a buck. Then again, what if you were going to a wedding that you thought would fail for sure? The system does seem very open to abuse though. Like, would they take into account someone who’s been married and divorced many times?

Well I guess that’s where these folks come in. I’m sure some folks who have been invited to weddings where they think “I’ll go, but I don’t get it. They fight all the time” might spend 8% just in case… definitely creepy, but not completely illogical… especially for those people who aren’t concerned with any Karma and feel compelled to go to a wedding for a marriage they feel they “know” is doomed fo fail….

Another good point. I’m definitely curious to see how long this company lasts.

People love markets so much that they create them everywhere, even places they don’t belong. I think these people are addicted to money and free markets. This is about as useful as viatical settlements.

A gift is a gift – freely given and without strings. After I give the gift, I don’t really care what the couple does with it. So it wouldn’t matter to me, financially speaking, if someone else’s marriage ends in 3 months, 3 years, or 30 years.

I have attended a bunch of weddings in the last few years because apparently we’re in that life stage, and only for one of them have I thought that the marriage probably won’t last. I feel so terrible because we love our friend dearly and tried to caution him against getting engaged, but he went ahead with it anyway. But no way would I want insurance on the gift we gave them! It’s still a gift, it doesn’t matter if they ever split up.

We had that run – then we had the “first kid” run. Now we’re in the second kid run… So basically, I’m going to a lot of kids’ birthday parties. The next person to say “come’ on you HAVE to have a piece of cake” while attempting to force feed me with a solid black piece of elmo’s nose is going to be wearing it! (Thanks… I needed to get that out…) 🙂

I’m with you on the gift is a gift too and hope you were all wrong about your buddy!

Unfortunately we are not wrong about what is amiss in their relationship – basically different views on a fundamental point of marriage on which they should agree. I hope that our friend will change his views to match his wife’s. We could be wrong about the extent of the impact of this difference on their marriage – actually I really hope we are wrong because I hate divorce. We didn’t want them to get married but now that they are we are all for them making a wonderful (and hopefully harmonious) life together.

This is pretty funny IMO, or sad? This seems ripe for fraud though. I never buy non-mandatory insurance, especially for small things like this. Remember the insurance companies always win, otherwise they raise their rates. Sounds like a lose-lose for me.

It’s a gift, regardless if the marriage lasts or not. Somehow the meaning of a ‘gift’ is lost in all of this. Regardless if I think a marriage will last or not is irrelevant. I’m not so hard up for money that I need to take out insurance on my gift of $200.

Absolutely right, MSA. I’m skeptical that this will catch on, especially with true friends/guests. Maybe there’s something to the “buy the receipt” speculators, but you would think they wouldn’t waste their time trying to convince wedding guests to sell them their receipts for a potential gain of $150. Seems like a lot of work for a chance at a few hundred bucks (or nothing) up to three years from now.

I definitely see the potential for fraud. That part is scary. As an eternal optimist though, I think the divorce rates are going to decline in a major way. Youngsters of today had to live through the 50% divorce rates of their parents. As a result, they are choosing their lifetime mate more carefully and waiting longer to get married in order to not repeat their parents mistakes. (No stats to support this – just a theory by me)